News From : DagangHalal.com (29 Oct 2010)
KUALA LUMPUR: The setting up of a dedicated exchange for Islamic nations would help create better market visibility for tradeable Islamic products, said Bursa Malaysia Bhd global head of Islamic capital market Raja Teh Maimunah Raja Abdul Aziz.
Raja Teh said such initiative would be driven by regulators of Islamic capital markets.
“Such exchange would involve an agreement between governments to have a bilateral arrangement, whereby an issuer can pick one of the markets where he would be regulated but his product is tradeable somewhere else,” she said on the sidelines of the Global Islamic Finance Forum 2010 yesterday.
She was drawing similarities to a multilateral trading facility in Europe known as Chi-X Europe that allows the trading of equities across major European markets at lower costs and faster speeds compared with primary exchanges.
While the idea of an Islamic exchange has been discussed with various parties such as exchange regulators and practitioners in other Islamic countries, Raja Teh said the current priority was to standardise the Islamic money markets globally.
“Maybe we will see a dedicated platform for the capital market products sometime soon.
“The focus right now, where the regulators and practitioners are concerned, is the money market side as banks are going through their biggest challenge,” she said.
Managing liquidity has been challenging for Islamic financial institutions (IFIs) due to limited availability of syariah-compliant instruments.
“Managing short-term Islamic liquidity is especially difficult for IFIs due to the absence of an intermediate Islamic money market.
“IFIs worldwide rely heavily on commodity murabahah for short-term investments and liquidity management,” Raja Teh said in her presentation on The Role Of Exchanges In Enhancing Islamic Market Liquidity.
She said challenges in Islamic market liquidity were born from an absence of a uniform regulatory framework, limited diversity in investment tools, lack of price transparency resulting in pricing differentiation, absence of a global benchmark issue and a maturity mismatch due to limited maturity profiles of instruments.
– Halal.com